BY JOHN ELLIS, FINANCIAL ADVISOR
Irish mortgage holders have received some welcome news as mortgage rates recorded their largest monthly drop since at least 2017, according to the latest Central Bank of Ireland (CBI) report. In December 2024, the average mortgage rate fell to 3.80%, down from 3.97% in November, marking the lowest level in more than 18 months.
This decline reflects the European Central Bank’s (ECB) recent rate cuts, with experts forecasting further reductions throughout the year. Trevor Grant, chairperson of Irish Mortgage Advisors, suggests that sub-3% mortgage rates could become a reality by summer if lenders continue to pass on savings to borrowers.
The ECB’s key lending rate now stands at 2.9%, its lowest in two years, directly impacting tracker mortgage holders and exerting downward pressure on both fixed and variable rates. This environment could lead to even greater savings for Irish homeowners.
Non-bank lenders, who rely more on wholesale funding, are also in a position to cut their rates. Evidence of this is already emerging, with Núa Money announcing rate reductions. Major banks, including Permanent TSB, Bank of Ireland, and MoCo, have also lowered their mortgage rates in recent months.
Grant predicts that if the ECB continues its trend of rate cuts, Irish mortgage rates could drop to 2.5% or below in 2025. This could mark a significant milestone for borrowers, offering relief in a housing market where affordability remains a challenge.
With mortgage rates continuing to ease, this is an favourable time for borrowers to assess their options. Those nearing the end of a fixed-rate term should consider switching lenders to secure a better deal, potentially saving thousands of euros over the lifespan of their loan. Market-based advice from a mortgage broker is essential, as while your own bank may offer you the best terms available, they are not obliged to tell you about better options elsewhere.
However, the benefits for mortgage holders contrast with unwelcome news for savers as the CBI report also revealed that the average interest rate on fixed-term household deposits fell from 2.60% to 2.45%, its lowest level since August 2023.
This trend is expected to continue, with deposit rates set to fall further in the coming months. Irish households currently hold around €160 billion in savings, yet most of this money remains in accounts offering little or no interest. Financial analysts suggest that locking into higher deposit rates now could be a wise move before rates decline further.
For mortgage holders, the window of opportunity to secure a lower rate is opening and homeowners and buyers should actively compare mortgage options and consider switching lenders if better deals are available. Meanwhile, savers should explore fixed-term deposit options to secure the highest possible interest rates before they disappear.
With further ECB rate cuts on the horizon,2025 could bring significant shifts in borrowing and saving strategies. The key is to stay informed and act proactively to maximise financial benefits.
086 8362633
